Recently, the Dutch legal landscape witnessed significant developments, shedding light on the complex world of sanctions compliance. At a European level, the European Union (“EU”) adopted a delegated Regulation updating the EU-dual-use export control list. Furthermore, under the EU Russia sanctions regime, new restrictions were imposed on the importation and purchase of iron and steel products originating in Russia. In the United States of America (“US”), additional rules were released updating export controls on advanced computing semiconductors and semiconductor manufacturing equipment. This, and more, in this newsletter.
1. The Netherlands
- The Netherlands – Fines for Dutch companies and individuals involved in construction of Crimean bridge – On 13 October 2023, the Dutch Public Prosecutor (“DPP”) concluded a comprehensive investigation into Dutch companies and individuals who were involved in the construction of the Crimean Bridge between Russia and Ukraine. The companies supplied machine parts, machines and other services for the construction of the bridge in violation of sanctions. The DPP accused the companies and individuals of contributing intentionally to the construction of the bridge in breach of sanctions. The criminal cases were settled out-of-court. Eight people were sentenced to community service, while four companies had to pay fines totalling EUR 160,000.
- The Netherlands – Dutch Public Prosecutor calls for a three-year prison sentence for exporting products to Russia without a license – On 17 October 2023, the District Court of Rotterdam dealt with the first sanctions case concerning the export of strategic goods to Russia without a license. This groundbreaking trial targets an individual and his company for alleged violations of sanctions and the illegal export of restricted goods to Russia. The DPP argues that the defendant not only breached sanctions but also used deceptive tactics, such as creating false invoices to conceal Russia-bound shipments. The DPP seeks a three-year prison sentence for the defendant and a fine of EUR 350,000 for the company. The Rotterdam District Court is expected to issue its verdict on 31 October 2023, setting a crucial precedent for companies and owners operating in the complex landscape of international sanctions and export controls.
- The Netherlands – Dutch shipbuilding company sues Dutch government over Russia sanctions – In October 2023, a Dutch shipbuilding company filed a lawsuit against the Dutch government. The company seeks compensation for damages it has suffered for business lost due to the sanctions against Russia. How much money is involved, is not known yet, but according to Dutch media, it concerns tens of millions of euros.
- The Netherlands – Annual Report Export Policy on Strategic Goods in 2022 – On 26 September 2023, the Dutch government published its annual report regarding the Dutch Export Policy on Strategic Goods in 2022 and the licensing of military and dual-use goods in that year. In 2022, a total of ten applications for export licenses, transit licenses and mock requests (probationary applications) for military goods were rejected. The final destinations of the rejected applications were: United Arab Emirates (3x), Pakistan (2x), Saudi Arabia (2x), Turkey (1x), Egypt (1x) and Hong Kong (1x). In this report, the government explains that – to enhance Dutch and European security – the Dutch government sees opportunities in strengthening cross-border cooperation with other European defence industries. The Dutch government wants to further align European arms export policies. In 2022, steps were taken to explore Dutch participation in a treaty related to military export control to which Germany, France, and Spain are a party. This treaty aims to streamline export control for collectively developed and produced defence goods. The Dutch government is now awaiting a formal invitation of the treaty parties to be able to start the membership process.
2. European Union
- EU – Update of Annex I of the Dual-Use Regulation – On 15 September 2023, the European Commission adopted a delegated Regulation updating the EU dual-use export control list in Annex I to Regulation 2021/821 (the “Dual-Use Regulation”). The update primarily focuses on the control parameters of manufacturing equipment, high-performance computers and lasers, the addition of propulsion motors for submersible vehicles and of technology for the development of gas turbine engines for aircrafts, as well as the adjustment of technical definitions, notes and descriptions and editorial changes. If no objections are raised by the Council and the European Parliament, the new Dual-Use Regulation will enter into force within a period of two months.
- EU – Annual Report Strategy against Spreading Weapons of Mass Destruction – On 20 October 2023, the EU published its annual report on combating the spreading of weapons of mass destruction, including an evaluation of the use of sanctions and export controls to facilitate this strategy. The EU reiterates its commitment to and continued support for the Joint Comprehensive Plan of Action (“JCPOA”). ‘The restoration of the JCPOA remains the only way for Iran to reap the full benefits of the JCPOA and reach its full economic potential as it will result in a comprehensive sanctions’ lifting that will encourage greater cooperation by the entire international community with Iran’ (p. 57).
- EU – Evidence required for importation of iron and steel products under new restrictions – As of 30 September 2023, it is prohibited to import or purchase iron and steel products that have been processed in a third country, and which incorporate iron and steel products originating in Russia, as listed in Annex XVII of Regulation 833/2014. The prohibition shall be extended on 1 April 2024 to include products with CN code 7207 11. Furthermore, on 1 October 2024, products with CN codes 7207 12 10 and 7224 90 will also be brought under the prohibition. As a result of the new restrictions, importers of these products shall be required to provide evidence of the country of origin of the products as of the respective effective date. This proof of origin takes the shape of a Mill Test Certificate (“MTC”). These MTCs require certain information to be listed, depending on the type of product. As such, as of the aforementioned dates, the Russian Federation cannot appear on the MTC of products with the relevant CN codes. The importer is responsible for the information to be provided to the customs authorities of the relevant EU Member State.
- EU – Risk assessment on critical technology areas – On 3 October 2023, the European Commission adopted a Recommendation in which it suggests Member States to perform a risk-assessment on technology security and technology leakage within the EU. The Recommendation points out four areas of technology that are considered highly likely to present the most sensitive and immediate risks related to technology security and technology leakage. These are: (i) advanced semiconductors technologies, (ii) artificial intelligence technologies, (iii) quantum technologies, and (iv) biotechnologies. The Commission recommends that Member States work together to assess the risks in these four areas by the end of this year. The Recommendation also includes guidelines to structure this collective risk assessment, and this includes consultation of the private sector. The Commission may present further initiatives in this area by spring 2024, depending on the dialogues with Member States and the results of the initial collective risk assessments.
- EU – Coordination of export controls by compiling national lists – On 26 October 2023, a first compilation of EU Member States’ national export control lists was published. This means that Member States are now able to impose authorisation requirements on the export of items included in other Member States’ control lists, creating the possibility for Member States to coordinate their actions on export controls. This first compilation includes Dutch and Spanish export controls on, amongst others, lithographic equipment, equipment designed for imaging semiconductor devices or integrated circuits and specific types of software and technology. The compilation shall be updated by the European Commission whenever Member States notify the Commission of new or amended national export control measures.
3. United States of America
- US – US BIS expands export controls on semiconductors – On 17 October 2023, the US Department of Commerce’s Bureau of Industry and Security (“BIS”) released three rules designed to update export controls on advanced computing semiconductors and semiconductor manufacturing equipment, as well as items that support supercomputing applications and end-uses to arms embargoed countries, including China. These rules reinforce controls of 2022 to restrict China’s ability to both purchase and manufacture certain high-end chips critical for military advantage.
- US – US sanctions entities contributing to ballistic missile proliferation – On 20 October 2023, the US Department of State designated three entities based in China pursuant to Executive Order 13382 for supplying missile-applicable items to Pakistan’s ballistic missile program. By means of these designations, the US is showing its commitment to strengthening the global non-proliferation regime by taking action to disrupt procurement networks supporting proliferation activities of concern.
- US – US imposes sanctions on a multinational network supporting Iran’s UAV procurement activities – On 19 September 2023, the US Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) designated a network of 11 individuals and entities supporting Iran’s unmanned aerial vehicle (“UAV”) and military aircraft industry. The network facilitated shipments, maintenance activities and financial transactions in support of the US-designated Iran Aircraft Manufacturing Industrial Company’s (“HESA”) UAVs. HESA was designated in 2008 for being owned or controlled by Iran’s Ministry of Defense and Armed Forces Logistics and for having provided support to Iran’s Islamic Revolutionary Guard Corps. Furthermore, OFAC updated HESA’s entry on the SDN List to include its new alias, Shahin Co, which it has used to evade sanctions and export controls.
- US – US sanctions entities for transporting oil sold above the coalition price cap – On 12 October 2023, OFAC imposed sanctions on two entities and two vessels that used Price Cap Coalition service providers while carrying Russian crude oil above the Coalition-agreed price cap and thereby breaching Russia sanctions. By means of the price cap policy, the US tries to reduce the oil profits upon which Russia relies to wage its ware against Ukraine while keeping global energy markets stable and well-supplied despite the war.
Questions?
Should you wish to receive more information about one of the topics described in this newsletter, please contact BenninkAmar Advocaten via e-mail at info@batradelaw.com or via telephone at +31203085918.